Lehman back from the brink?

Presenting the US bank's first-quarter results in New York, chief financial officer Erin Callan said the bank's liquidity provisions were "structured to cover expected outflows for 12 months". It had a liquidity pool of $34 billion in cash and cash-equivalent securities "designed specifically for this type of environment", she said. In addition, Lehman closed a $2 billion three-year unsecured revolver yesterday at the "encouraging" price of 60 basis points above the London interbank offering rate (Libor), she added.

Lehman has not drawn on the liquidity facility announced by the Fed earlier this week, but Callan said "the Fed's actions are very helpful" and added that "the rate and the margin levels are very attractive".

The bank still has significant exposure to residential mortgages. Its mortgage book totalled $31.8 billion at the end of the quarter, down only slightly from $32.1 billion on November 30. Of this, $4 billion was subprime or second-lien debt and another $14.6 billion prime and Alt-A, of which at least $13.6 billion was Alt-A, Callan said. Net income was $489 million, down 57% from the first quarter of last year.

After falling sharply yesterday as investors feared the bank could follow Bear Stearns into catastrophe, Lehman Brothers shares rose again this morning, up 36% to $43.20 on the New York Stock Exchange, after heavy trading yesterday which saw it fall to $20.25.